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Competitive Stakes Rising in European Natural Cosmetics Market

Posted: October 8, 2010

Slowing market growth rates and an influx of new entrants are raising competitive stakes in the European natural cosmetics market, according to Organic Monitor's European Natural Cosmetics Market report, which projects the European market to expand by 12% in 2010. Although outpacing the total cosmetics market, growth is far below the 20% plus growth rates observed in previous years.

Organic Monitor finds market winners since the economic downturn have been competitively priced brands. Consumers are attracted to the value prepositions offered by such brands (certified natural and organic products at low prices) with private labels doing exceptionally well. They are most prominent in Germany where they comprise about a third of all natural cosmetic sales; private labels have been introduced by supermarkets, drugstores, organic food retailers and even discount stores. Alverde, the private label of DM drugstores, is emerging as the leading brand of natural cosmetics in Germany. More than 300 products are marketed under the Alverde brand, with many priced below €2.

Most growth in the European market is coming from mainstream retailers, with brands targeting these channels gaining ground. Burt’s Bees, one of the leading American brands, is showing healthy growth as it increases distribution in supermarkets and pharmacies. Other new entrants are taking a segmented approach, focusing on specific consumer groups and/or channels. For instance, the U.K. brand Bulldog is expanding in the Nordic region with its range of natural male grooming products. The Israeli brand Yes To is targeting chemists and drugstores with its range of food-based cosmetic products. In comparison, some premium natural and organic brands are losing market share because of sluggish demand from organic food shops and beauty retailers.

In response to the changing market conditions, many natural beauty brands are taking the direct route to get closer to consumers. Apart from online retailers, a growing number of companies are opening concept stores across Europe. Paris is becoming the epicenter of natural cosmetic retailers; leading brands, such as Weleda, Dr. Hauschka and Couleur Caramel have opened concept stores in recent years. Whereas leading French brands—including Melvita and Florame—are building international retail networks.

Attracted to healthy growth rates, many large brands—including Garnier and Schauma—are entering the natural and organic beauty segment. As competition steps up and retail shelf-space becomes crowded, Organic Monitor expects not all new entrants to be successful; extending existing product ranges with natural/organic lines do not always appeal to green consumers. As competition steps up, Organic Monitor predicts market winners to be those companies who can adopt strategies based on product differentiation.